Ownership structure and agency costs: evidence from the insurance industry in Jordan


  • Mohammad Tayeh Department of Finance, School of Business, The University of Jordan, Amman, Jordan
  • Rafe’ Mustafa Holy Land Insurance Company, Amman, Jordan
  • Adel Bino Department of Finance, School of Business, The University of Jordan, Amman, Jordan


Agency costs, Ownership structure, Managerial ownership, Large shareholders, Insurance industry



This study investigated the impact of corporate ownership structure on agency costs in the insurance industry.


The study sample included 23 insurance companies listed on the Amman Stock Exchange (ASE) from 2010 to 2019. Panel regression was used to account for the firm- and time-specific unobservable variables and system-GMM estimation was used to address endogeneity concerns.


The results show that managerial ownership positively (negatively) affects selling, general and administrative (SG&A) expenses (assets turnover), implying that unmonitored managers engage in activities that serve their own interests rather than those of shareholders. The largest shareholder's ownership has no impact on agency costs, implying that the ownership of the largest shareholder is irrelevant. However, as the wedge between the percentage of capital owned by the largest shareholders and managers increases, SG&A expenses (efficiency ratio) decrease (increases), indicating that the existence of large non-management shareholders reduces agency costs. After accounting for the endogeneity problem, the impact of ownership structure on agency costs measured by asset turnover remains robust.


To the best of the authors' knowledge, this study is the first to provide unique evidence and useful insights into the determinants of agency costs from a frontier market in the Middle East and North Africa (MENA), with a focus on the insurance sector. Additionally, this study uses a new measure of separation between ownership and control by calculating the wedge between managers' and large shareholders' ownership.

DOI: https://doi.org/10.1108/JEFAS-12-2021-0257


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How to Cite

Tayeh, . M., Mustafa, R. M., & Bino, A. (2023). Ownership structure and agency costs: evidence from the insurance industry in Jordan. Journal of Economics, Finance and Administrative Science, 28(56), 287–302. Retrieved from https://revistas.esan.edu.pe/index.php/jefas/article/view/687